The budget is all over and barring the odd criticism whose position and stature in life makes it imperative that they criticize, by and large the budget has been appreciated by the majority of people. It could have been better say quite a few and yet some others say there should have been big bang reforms. When queried what would qualify as big bang there are no answers. I believe that the budget has direction, intent, clarity and a roadmap for the immediate future.
Vital issues like GST, the time has been announced while DTC has been virtually shown the door. GAAR has been deferred for two years and more importantly clarified that it would be prospective effect. Virtually all issues concerning the inflow of capital or money from investors have been amicably resolved. Issues like tax residency of fund manager, tax as a pass through for REIT’s and AIF’s have all been allowed. Further the government has made a change in share ownership and removed the distinction between FII and FDI where 100% investment is allowed.
The government has made infrastructure a focus area and reintroduced tax free bonds to be used by roads, railways and ports. The importance of our minor ports and using the same for transportation will be used to the maximum. The need of the hour is to cut wasteful expenses, reduce expenditure on subsidies and ensure that the leakages in the system are minimised. These issues have been given priority and efforts taken to ensure that the same is introduced and speeded up.
There seems to be some confusion on proceeds from divestment taken in the budget. However there is clarity on the fact that clause49 of the listing agreement has to be complied with where government holding or promoter holding would have to be brought to 75% at maximum. Secondly the shares held by SUUTI primarily Axis Bank, ITC and L&T are to be sold and also remaining shares in Hindustan Zinc and BALCO. If one does some preliminary calculation on these the figure is more than 1 lac crs and for this to happen the markets have to remain buoyant.
FII’s will like the fact that fiscal deficit target of 4.1% has been achieved and over the next three years would be reduced to 3%. The CAD would be less than 1.3% and also that the government has presented for the first time ever a federal budget with states getting a direct 42% share in revenue and with grants increasing to 62% of revenue.
The real joker in the pack was the increase in excise duty on tobacco and cigarettes which saw ITC being hammered out of shape. The other was the increase in service tax which has been raised from 12.36% to 14% including the cess and surcharge.
I believe the budget has done its bit and now it’s the turn of corporates to perform. The last few quarters have seen our markets doing extremely well and valuations are no longer cheap. Therefore for share prices to move up earnings have to increase.
Hoping for the best and quite confident that corporates will respond to the challenge.
Wishing all readers a Happy Holi and the advent of Spring.